Finance officials first up in school funding suit

City Council Atty. Allan Wade makes a point during a court hearing on school funding Thursday as attorneys Ernest G. Kelly Jr. (seated) and Jay Bailey listen.

Dave Darnell/The Commercial Appeal

Shelby County Sheriff's Deputy Mike Kraemer carries extra chairs into Chancellor Kenny Armstrong's courtroom Thursday to help with the crowd that came for the school-funding lawsuit being heard. Many missed opening arguments because there weren't enough seats.

Dave Darnell/The Commercial Appeal

The court battle over school funding between Memphis City Schools and the city of Memphis opened Thursday with spirited disagreements about whether state law requires the city to fund the state's largest school district.

Attorneys representing the school district and its partners in the lawsuit said the city clearly has a responsibility to fund the district.

City Council Atty. Allan Wade, however, showed slides of the city charter he said proved that any money given to the city is discretionary. Funding duty, he said, is clearly given to county governments by state law.

MCS filed suit last month after the council voted to cut $66.2 million from its property-tax allocation to the school district.

Wade said the lawsuit is "asking the court to substitute its judgment for that of the Memphis City Council."

"The taxpayers need a break," Wade said. "Who speaks for them?"

More than a dozen media representatives and community activists missed more than 90 minutes of opening arguments because Chancellor Kenny Armstrong ordered those who did not have a seat to leave the small, packed courtroom.

During the court's first recess, deputies brought in more chairs to seat the throng of citizens waiting outside.

Most of the testimony came from Nancy Richie, executive director of fiscal services for MCS.

Wade grilled Richie about the district's budgeting and her understanding of the state's "maintenance of effort" law, which forbids local governments from reducing school funding in most instances.

The state law allows local funding bodies to reduce funding to schools if enrollment drops, but Wade said records show city schools continued to take in more money each year even as enrollment dropped. In fact, he said, the district pocketed more than $80 million in funding as a result of enrollment drops.

Why, Wade asked, did the school district not tell the council it could reduce the budget?

"I assume the legal counsel of the city would know that and advise them," she said.

Richie told the court that the district could operate until November or perhaps December if the state started withholding funding. After that, it would have to shut its doors. And if MCS wanted to be sure it could pay unemployment and insurance benefits to affect employees, school would have to close in October.

Wade, however, said he wants to hear from Supt. Kriner Cash. He believes Cash's public statements that the district could manage the city's cut without severely harming classroom instruction are proof the district would not suffer irreparable harm.

Richie disagreed.

She said that under scenarios the district is examining, 250 employees would be let go, including about 70 maintenance staffers. Students would have to keep learning under old social studies textbooks because the MCS won't be able to afford the new books that go with the corresponding new standards.

And the district would be unable to pay for substitute teachers past February, nor would it be able to keep all of its elevators and fire alarms in top shape.

Those scenarios assume the state funding is intact, she said.

Early in Thursday's hearing, Armstrong ruled that the $152 million counterclaim filed by the city should be separate from the present suit. If he decides in favor of the school district, any decision on damages to be paid by the city would also take place in the separate trial.

Shelby County Schools Supt. Bobby Webb also took the stand Thursday, called in as an expert witness on the Better Education Plan, Tennessee's funding formula.

Webb said it would be impossible for the 47,000-student suburban system to swallow the 110,000-student city school district.

Under questioning by Wade, Webb said that even if it was possible, any agreement would require approval by a federal court because county schools remain under a desegregation order.

Wade grilled Richie about the school district's budgeting and her understanding of the state's "maintenance of effort" law, which forbids local governments from reducing school funding in most instances.

The state law allows local funding bodies to reduce funding to schools if enrollment drops, but Wade said records show city schools continued to take in more money each year even as enrollment dropped. In fact, he said, the district pocketed more than $80 million in funding as a result of enrollment drops.

Why, Wade asked, did the school district not tell the council it could reduce the budget?

"I assume the legal counsel of the city would know that and advise them," she said.

Richie told the court the district could operate until November or perhaps December if the state started withholding funding. After that, it would have to shut its doors. And if Memphis City Schools wanted to be sure it could pay unemployment and insurance benefits to affect employees, school would have to close in October.

Wade, however, said he wants to hear from Supt. Kriner Cash. He believes Cash's public statements that the district could manage the city's cut without severely harming classroom instruction are proof the district would not suffer irreparable harm.

But Richie disagreed.

She said under scenarios the district is examining, 250 employees would be let go, including about 70 maintenance staffers. Students would have to keep learning under the old social studies textbooks, because MCS won't be able to afford the new books that go with the corresponding new standards.

And the district would be unable to pay for substitute teachers past February, nor would it be able to keep all of its elevators and fire alarms in tiptop shape.

Those scenarios assume the state funding is intact, she said.

Early in Thursday's hearing, Armstrong ruled to separate a $152 million counterclaim filed by the city from the present suit. If he decides in favor of the school district, any decision on damages to be paid by the city would also take place in the separate trial.

Shelby County Schools Supt. Bobby Webb also took the stand, called in as an expert witness on the Better Education Plan, Tennessee's funding formula.

Webb said it would be impossible for the 47,000-student suburban system to swallow the 110,000 city school district.

Under questioning by Wade, he said even if it were possible, any agreement would require approval by a federal court because county schools remain under a desegregation order.